3rd Edition

ISBN: 9780136946694

Author: GORDON

Publisher: RENT PEARS

Concept explainers

Leasing is a contractual arrangement in which someone (a lessee) pays the owner (or lessor) of a building, land, vehicle, or other asset for the use of that asset. The lease is the agreement between lessee and lessor.

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Textbook Question

Chapter 18, Problem 18.4BE

Classification as Finance or Operating Lease, Lessee, Discount Rate. Using the information provided in BE18-3, determine whether this lease is a finance or an operating lease if Dial Digital knows that the lessor’s implicit rate is 6%.

BE18-3. Classification as Finance or Operating Lease, Lessee. Dial Digital Solutions signed a 3-year lease at the beginning of the current year. The leased equipment has an economic life of 5 years and a fair value of $1,450. Under the terms of the lease. Dial is required to pay $500 on January 1 of each year. There is no purchase option, and Dial must return the equipment at the end of the lease term. Dial does not know the lessor s implicit rate but recently borrowed at 5% under a 3-year loan agreement. Should Dial account for this lease as an operating or a finance lease?

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Chapter 18, Problem 18.3BE

Chapter 18, Problem 18.5BE

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Chapter 18 Solutions

INTERMEDIATE ACCOUNTING

Ch. 18 - Does the lessee become the owner of the equipment...Ch. 18 - Prob. 18.2Q Ch. 18 - Prob. 18.3Q Ch. 18 - What are typical terms and provisions in a lease...Ch. 18 - How does a lease offer business and financial...Ch. 18 - Prob. 18.6Q Ch. 18 - How is the right-of-use asset measured?Ch. 18 - What components are included in a lease contract?Ch. 18 - How does a lessee separate lease and nonlease...Ch. 18 - How does a lessor separate lease and nonlease...

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